The Prosperity Blog

Should You Keep or Surrender a Universal Life Policy?

“You got to know when to hold up, know when to fold up, know when to walk away, and know when to run.”—Kenny Rogers, “The Gambler”

Recently, we gave you the good, the bad, and the ugly about universal life insurance policies. As it turns out, there isn’t a lot of “good” for aging policy owners who are seeing their premiums skyrocket. Lawsuits continue to mount from policy owners who feel they have been misled. Some realize their “permanent” policies will expire before they do! Others realize their policies will lapse if they cannot make ever-increasing premium payments. This was not what they thought they signed up for!

Last year, state regulators in New York issued a cautionary alert to consumers about universal life insurance with this all caps, bolded warning: “YOUR PREMIUM PAYMENT AMOUNT IS PROBABLY NOT GUARANTEED AND MAY INCREASE.” In 2018, the Texas Department of Insurance put out a similar warning. A short informational video illustrated how universal life policies can lose value and even lapse due to the ongoing costs, especially in timse of low interest rates and underperforming investments.

Now, warnings are great if you are shopping for life insurance. But what should you do if you already have a universal life policy that lacks guaranteed level premiums and a guaranteed death benefit? In this article, we’ll outline options and actions that can help protect you from an imploding policy.

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Understanding Life Insurance Dividends

With all of the stock market volatility and low-low interest rates, there has been a resurgance of interest in dividend-generating assets. Most people think of stock dividends, but stocks aren’t the only asset that can generate dividends.

For those looking for a good “safe money” option, we recommend dividend-paying life insurance! In this article, we’ll address:

  • What are life insurance dividends and how do they work?
  • What kinds of companies pay dividends?
  • Are life insurance dividends taxable?
  • What are your life insurance dividends options?
  • And more.

Essentially, we’ll try to answer “everything you always wanted to know about life insurance dividends but were afraid to ask!”

What are life insurance dividends?

Mutual Life Insurance companies share their profits with participating policy holders. They do so via a dividend. This dividend is declared annually, usually around the end of the calendar year. You may have seen announcements about 2020 dividend payouts. Many companies declared their biggest dividend payouts ever, including:

  • Northwestern Mutual, which paid policy holders $6 billion in 2020, up from $5.6 billion the year before.
  • New York Life paid eligible participating policy owners a record dividend payout of $1.9 billion.
  • MassMutual (Massachusetts Mutual) made dividend payments to $1.7 billion.
  • Guardian Life paid policy owners a $982 million dollars in dividend this year, also a record payout.

Note this dividend is listed as a dollar figure and only sometimes an interest rate (more later on the latter).

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Preparing for Economic Dangers and Opportunities

As we went to press with this, we learned of President Trump and Melania Trump’s positive diagnosis. We trust they will make a full recovery. In the meantime, the stock market is likely to be extremely volatile. With the NASDAQ down 2%+ today, the news affirms the importance of being prepared for financial uncertainty—and how equities and other assets may react!

There is a saying, “Pay attention or pay with pain.” This saying is relevant when it comes to finances—especially in 2020. By paying attention, we can not only avoid losses—we can discover opportunities!

When news of a pandemic made its way around the world in early 2020, many investors were caught off guard. They lost large sums of money in the fastest bear market crash ever.

In contrast, others were paying attention! They avoided losses by repositioning assets and reducing risk. Some even benefited by storing cash on the sidelines they could re-deploy when stocks and other assets took a dive.

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Choosing the Best Whole Life Insurance Company

What to look for when choosing a life insurance company

If you are shopping for permanent life insurance, you’re buying “for keeps,” as the expression goes. Life insurance isn’t like a pair of sneakers, a phone or a car that you might own for a few years before upgrading. And if you’re going to have life insurance for the rest of your life, you want to choose the best whole life insurance company!

And when it comes to picking a life insurance company, there are “things that matter” and “things that really DON’T matter. We’ll break down that distinction to help you prioritize (even though you may still have a preference).

Let’s start with the important stuff!

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Easy Money!? 15 Ways to Create Passive Income

Recently we got a listener question for The Prosperity Podcast: “Is there really such a thing as passive income?” Yes, there is! True passive income isn’t quite as rare as Santa Claus or the Easter Bunny. However, as Spencer Shaw and Kim Butler discussed in this podcast episode, there can be a LOT of grey area between earning active income (such as a job) and completely passive income.

By definition, something that is “passive” would require little to no active work or time commitment. The IRS defines passive income as only coming from two sources: rental activity or “trade or business activities in which you do not materially participate.” However, many strategies thought of as “passive income” may indeed require some work, either intermittently or in the beginning. For instance, authors or songwriters may earn passive income royalties based on work done in the past. In this article, we’ll explore 15 ways to create passive income—and semi-passive income.

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Financial Maturity: 7 Stages of “Adulting” with Money

Financial Maturity: 7 Stages of “Adulting” with Money

What does it mean to be an “adult” with money? What are the recognizable signs of financial maturity? To answer this, we’ll expand on a list co-author Kate Phillips shared in a Total Wealth video on “Adulting with Money.”

First—in case you are unfamiliar, let’s define “adulting.” The term refers to one’s ability to behave responsibly and maturely to accomplish necessary tasks.

While the focus is decidedly on behavior, financial maturity isn’t just a checklist of habits or accomplishments. It’s also a mindset. Adulting includes an understanding the role money plays in the world and the opportunities—and responsibilities—it brings.

Let’s dive in!

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Income for Life: Create Cash Flow with an Annuity

A guaranteed lifetime income is a compelling proposition. After all—who doesn’t love the idea of being set for life?  Financial planning for retirement begs for guarantees. While it is impossible to know how long you’ll live, it IS possible to make sure you will receive (at least) a certain amount of income for the rest of your life. Especially in this age of rock-bottom interest rates, a lifetime income annuity can be a lifesaver for some retirees!

Single Premium Immediate Annuities (SPIAs) can provide this income, yet few people use them in their retirement strategies. How can you know if a lifetime income annuity makes sense for your situation? Let’s explore.

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